Financial Aid Law (FAL)

Dear Administrator:

November 14, 2013

The purpose of this letter is to update you on the forthcoming review by the Department of Health (Department) of hospital compliance with the requirements established in Public Health Law Section 2807-k (9-a), known as the Financial Aid Law (FAL). The reviews are being conducted in accordance with a provision enacted in the State fiscal year (SFY) 2013-14 budget to establish a "financial assistance compliance pool" beginning January 1, 2014. Under the provision, hospitals that are determined not to be in "substantial compliance" with the FAL will not be able to receive their share of Indigent Care Pool funds set aside for the FAL compliance pool established pursuant to Section 2807-k 5-d(b)(iv) of the Public Health Law.

Enclosed for your information are copies of the FAL statute, and the updated questionnaire to be used by the Department in its review. These documents provide hospitals with guidance on the upcoming FAL compliance review, scheduled to begin in November 2013 as part of the audit of the 2012 Institutional Cost Report (ICR).

The FAL requires that hospitals establish a financial assistance program for services provided to low income uninsured and under-insured patients in order to participate in ICP distributions. The financial assistance program must be based on clear, understandable policy and procedures, be available for all emergency services as well as non-emergent services to patients within the hospital's service area, follow the FAL charge and fee scale, and meet the certification and reporting requirements established in the statute.

In order to assist hospitals with this process, Department staff has met with the hospital associations on several occasions, and has conducted information seminars to educate the provider community on the expectations for the upcoming compliance review. In these sessions, an overview of the FAL was provided along with a "Check List" so that hospitals may self-assess their progress on compliance, and correct any deficiencies. Furthermore, as noted previously, the law itself is a valuable resource for hospitals as the specific requirements are stated in detail. Please also note that, pursuant to discussions with the hospital associations and consumer advocacy groups as part of the Indigent Care Reform Work Group, the Department will add the following to the list of hospital FAL requirements, effective July 1, 2014:

  • Hospitals must ensure that its policy summary and financial aid applications are available on hospital websites.
  • All hospital denial forms must include Department contact information.
  • Each hospital´s Compliance Officer (or designee) must attest that their hospital is in substantial compliance with the FAL. An updated "Check List" is also enclosed to assist with compliance review.
  • Please note, effective with the 2012 ICR submission hospitals are now required to report the number of court ordered judgments against patients through the collection process on Exhibit 50 of the 2012 ICR. The instructions have been updated to reflect this additional reporting requirement.

In addition, the Department is providing additional guidance pursuant to questions we have most commonly received from hospitals during the past year. Hospitals should consider this guidance, along with guidance previously provided in the Department's letters on financial aid.


In accordance with the FAL, hospitals must offer financial assistance to low income patients who are uninsured or have exhausted their insurance benefits, meaning that the insurance company has put a monetary or utilization cap on available benefits in a given year, and the patient is unable to receive further coverage. The Department has received many questions about the hospital´s obligation to provide financial assistance when a patient has insurance but may not be covered for a non-emergent, medically necessary treatment or procedure. It is the Department´s position that if the patient´s insurance company denies coverage the patient would be deemed uninsured for the purposes of the FAL. Rules applicable to income eligibility would still apply.

For patients that participate in high deductible plans, the Department encourages hospitals to discretionally extend their policies to include this population.

Determinations of Medical Necessity

The determination of treatments and procedures that meet the definition of medically necessary for an individual patient has been a subject of discussion since the adoption of this law.

Hospitals often feel that they are obligated to provide services at times when they do not agree with the determination of medical necessity made by community physicians and/or practitioners. In response, some hospitals have proposed processes where a patient would be required to have a second evaluation in a hospital´s extension clinic to verify the medical necessity of the particular order for treatment or procedures.

The Department´s position is that this process is not allowable under the FAL in two ways. First, this second evaluation inconveniences the patient and seems to create a process that is "overly burdensome and complex," constituting a barrier to the receipt of financial assistance. Second, central to this concept seems to be the questionable referral practices and judgments of community referral partners. The Department believes that this subject should be addressed directly between the hospital and individual physicians and/or practitioners rather than through a statewide policy decision.

We look forward to continued cooperation between the Department and hospital community in ensuring that all New Yorkers have access to the best health care available. If you have any questions or concerns on this matter, please contact Roland Guilz at (518) 474-1673.


John E. Ulberg, Jr.
Medicaid Chief Financial Officer
Division of Finance and Rate Setting
Office of Health Insurance Programs

Enclosures: (statute; questionnaire; check list)